29 Mar Keeping up with Audit Demand
A SMSF is set up every 13 minutes in Australia — can you keep up with audit demand?
With self managed super funds increasing in popularity, some reports indicate that there is a SMSF set up every 13 minutes in Australia.
This means that accountants have an awful lot of audit work to do on behalf of their SMSF clients. Can you keep up with demand? Are you up to speed with compliance?
Each year the ATO publishes the top ten compliance errors that are worth reminding yourself about.
The largest compliance mistakes involve:
- In-house assets
- Separation of assets
- Loans to members/financial assistance
- Administrative-type contraventions
It’s worth reiterating the sole purpose rule in light of these compliance errors.
SMSF investments must be for the ‘sole purpose’ of providing retirement benefits for the members of the fund. Members, relatives or associates of the Trustees must not gain any immediate benefit from the fund’s assets or activities. For example, any residential property owned by the fund cannot be used by the fund members or their families, even if rented out at market rates.
There are huge tax penalties for making this error. Regulators have stated that the sole purpose test is of high importance when it comes to determining if a SMSF is a complying fund. A complying fund is taxed at 15 per cent while a non-complying fund is taxed at 47 per cent.
The sole purpose test is divided into core and ancillary purposes. A regulated fund must be maintained for at least one core purpose OR at least one core purpose and one or more ancillary purposes. However a fund cannot be maintained for one or more ancillary purposes only.
What is a Core purpose?
- Providing benefits to members on or after retirement from gainful employment.
- Providing benefits to members when they have reached a prescribed age, or
- Providing benefits in respect of members on the member’s death prior to retirement or reaching the prescribed age.
What’s an Ancillary purpose?
An Ancillary purpose includes the provision of benefits for members in the following circumstances:
- On or after the termination of the members employment with an employer who had contributed to the fund for that member
- Cessation of employment due to ill-health (physical or mental).
- Death of the member after retirement or attaining a prescribed age
If you have any questions about SMSF independent auditing, or need clarity on the sole purpose rule, contact me, Catherine Price, at TABS – Super Fund Auditors..